New Delhi: Securities and Exchange Board of India (Sebi) chairman Ajay Tyagi on Saturday said mutual funds are not any substitution for bank deposits as returns are not assured on such investment products. However, he said mutual fund is the right route for retail investors to participate in the capital markets.

“Mutual funds investment is not any substitution for bank returns. If people are shifting from banks to mutual fund to that extent it is not an assured return but this is right way to come to if people want to come to capital markets," Tyagi told reporters in New Delhi. “Right thing which is happening for the retail investors is that they are going through mutual fund route. Mutual fund route is where professional investment managers take the decision to invest your money but there is no issue of panic. If they are investing in the capital markets the extant risk would be there," he added.

Currently, the country has 42 mutual fund players with assets under management of over Rs22 trillion. Asked about algo trades, Tyagi said Sebi is keeping a watch on the issue and there is no reason for panic as risk management systems are quite robust. In market parlance, algorithmic or ‘algo’ trading refers to orders generated at a super-fast speed by use of advanced mathematical models that involve automated execution of trade, and it is mostly used by large institutional investors.

“Our risk management systems are robust and algo trade increases liquidity in trading. One of the advantages of algo trade is price discovery. We are totally watchful and there is no cause of any panic," Tyagi said. With respect to setting up of unified regulator for International Financial Services Centre (IFSC), it said the issue has been going for a very long time. There are models abroad where such types of IFSCs have been regulated by independent regulators. “I think government will come out with a separate law for that and set up a separate regulator. I don’t think Sebi will be regulator for this," he added.

Finance minister Arun Jaitley, in his budget speech for 2018-19, had proposed a unified regulator for the IFSC at GIFT City in Gujarat, a move that will contribute to better regulation and supervision of the financial entities. GIFT City has been set up by the state government as India’s first IFSC that brings together world class infrastructure, connectivity, people and technology on a single platform for businesses across the world. IFSC at GIFT City is probably the first such centre to be launched after the 2008 global financial crisis.

When asked about the budget’s proposal for tightening of penalty on intermediaries and brokers to up to Rs25 crore, Tyagi said that this was a well considered amendment and will only make enforcement efficient.